Analysis of Key Resources and Capabilities of Nokia

Nokia although is renowned for manufacturing cellular phones but it’s just one part of it highly diversified
portfolio of B2B telecom equipment & services (2nd to 5th generation infrastructure, microwave, fiber
optics, routers). Its core business is selling telecom & routing equipment (~ 85% of revenue) to Mobile
Network Operators MNOs (e-g AT&T,Verizon, Telefonica etc.) along with installation, commissioning,
maintenance and providing solutions for enhancing end user experience. The findings after analyzing
competitive landscape of Nokia using Porter’s five forces model are below.

Competitors No Potential
Entrants

The telecom market is highly concentrated with four-firm CR4 ratio of ~ 91 %, the major
players are Ericsson [27%], Nokia [23%] , Huawei [28 %] and ZTE[13%]. There
exists a little to no diversity among the competitors as far as the product portfolio
is concerned and three biggest players are competing in all the geographies.
There is an intense price competition and that’s why Nokia acquired ZTE ,
Alcatel-Lucent in 2016 to join forces against HUAWEI and Ericsson. High
The Ericsson , MNOS
bargaining (Telefonica ,
Huawei are
acquisition of Alcatel presented an opportunity for Nokia to expand its over
power AT&T , Verizon
Suppliers the main etc)
product portfolio, expand its business in European markets and gain entries to rivals
US and Chinese markets along with achieving synergies.

Customers
ZTE , Ericsson ,
There are ~ 800 registered MNOs which are targeted by Nokia and other major players Huawei are
the perfect
alike, while some MNOs have outsourced the passive part of telecom infrastructure to theirsubstitutes

vendors to focus on revenue generating customer focused core businesses whereas others
manage both passive and active infrastructure by themselves. The customer in telecom market has a
high price sensitivity and exercises enormous bargaining power due to intense competition and no clear
product differentiation in the offerings of vendors. Customers of telecom infrastructure providers which are
MNOs themselves are facing intense competition from each other, the subscribers of wireless telephone
& data services face negligible cost while switching from one operator to another thus resulting in fierce
competition among operators in a country. The operators then force telecom vendors to squeeze their
margins thus resulting in a negative spiral where end user is the one that is benefiting the most.

Potential Entrants
The market poses significant barrier to entry because of already established vendors who possess early
movers advantage with loyal customers and benefit from economies of scale. Large investments are
needed to research, manufacture and selling the equipment in an already very competitive market and
moreover a new entrant will not be able to compete due to high unit costs resulting from low volume of
sales and major patents secured by big players. As a contrast to MNOs (buyers)who need to acquire
license from public authority, telecom vendors don’t face government and legal barriers.
Substitutes
All the major vendors are perfect substitutes of each other due to quite similar product offerings, this
indistinguishability has resulted in price to be the major deciding factors apart from some long-established
alliances between vendors and their key buyers. Before Huawei & ZTE (the two Chinese vendors funded
by government) entered the market in the last decades of 20 th century, the market was dominated by long
established European giants Nokia (Finland) , Ericsson ( Sweden) and Alcatel-Lucent ( France). The price
war initiated by Chinese vendors helped them gain market foothold at a phenomenal rate but resulted in
evaporation of margins for European competitors and forcing them to be more competitive which resulted
first in the merger of Alcatel & Lucent in 2006 and finally acquisition of Alcatel-Lucent by Nokia in 2016.
 Suppliers:
Previously Nokia held production facilities in China, India, Germany and Finland. But in 2008, following a
global wave of cost cutting ,it sold its production units in Germany and Finland with a deal of continued
production for Nokia. Due to huge scale of Nokia’s operations, it holds a commanding position while
bargaining with its multiple hardware suppliers. The software supplier for mobile phones is either
Microsoft or Google over which it exercises limited control.

The Value Chain analysis presented below can be used to identify and classify the organizational
capabilities of Nokia. All the primary and support activities undertaken by Nokia (from development to
sales and eventually proving services to customer for installation and maintaining the deployed
infrastructure) play an essential role in maintaining foothold and penetrate further into the existing and
emerging telecom markets.
As a tech company, it is investing heavily on emerging technologies like IoT, AR/VR, 5G to stay
competitive by offering differentiated services to its customers.

Support Activities

Firm Infrastructure Technology

HR Management Procurement Development
An established vendor with A giant organization divided into A centralized procurement Nokia after acquisition of Alcatel owns Bell
global reach, branch offices in all various business groups responsible for securing Labs which is technological innovation hub.
countries, regional headquarters (Services, R&D , Sales / Pre Sales , suppliers along with Nokia plans to be leader in innovation by heavy
in economic hubs and centralized Customer operations ) with negotiating prices for both HW investment on development and advancement
decisions making from corporate more than 100,000 employees. components and services of 5th generation telecom equipment with data
headquarter in Finland. Nokia has its own university and needs and also ensuring timely
rates > 1000 times as compared to 4th
Production facilities are mainly in remote learning platforms to delivery of equipment to generation, internet of things, artificial and
China and India to reduce develop technical and
various customers. augmented reality platforms. There is a plan
manufacturing costs. management skills of its
employees. underway to reduce services cost through use
of AR

The order is placed to production For mobile phones marketing Nokia provides installation, integration & Operations involve production of
facilities at least 2 months in is done through B2C channels ( commissioning of equipment and network equipment and installation
advance (excluding customs TV , newspapers etc) but optimization services to achieve reasonable services. The integrated circuit
clearance time) to ensure timely boards, RF components are
telecom equipment is only sold values of key user experience indicators for its
delivery of telecom equipment customers. This is managed by putting in place provided by suppliers which are
through B2B channels with
which can be shipped to the then assembled in production
Sales head of each account a customer operations head who is also the
customer either by sea or air facilities and transported to all
being responsible to meet key customer contact to whom all the business
depending on the urgency and over the world to various MNOs.
customer and secure new groups report. As per the latest model
willingness to pay extra cost.
opportunities. introduced, the customer operations head is
from Sales team.

Operations Outbound Logistics Sales & marketing Services

Primary Activities